##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: December 27, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-03905
 TRANSCAT, INC.
  Ohio
    
    16-0874418(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 35 Vantage Point Drive, Rochester, New York 14624
 (585) 352-7777
 þ o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



Page(s)PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements:Statements of Operations and Comprehensive Income for the Third
Quarter and Nine Months Ended December 27, 2008 and December 29,
2007
    
    3Balance Sheets as of December 27, 2008 and March 29, 2008
    
    4Statements of Cash Flows for the Nine Months Ended December 27, 2008
and December 29, 2007
    
    5Statements of Shareholders Equity for the Nine Months Ended
December 27, 2008
    
    6Notes to Consolidated Financial Statements
    
    7-12Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    13-22Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    22Item 4.
    
    Controls and Procedures
    
    23PART II.
    
    OTHER INFORMATIONItem 1A.
    
    Risk Factors
    
    23-24Item 6.
    
    Exhibits
    
    24SIGNATURES
    
    25INDEX TO EXHIBITS
    
    26EX-10.1EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 
 TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 (Unaudited)
    
    
    (Unaudited)Third Quarter Ended
    
    
    Nine Months EndedDecember 27,
    
    
    December 29,
    
    
    December 27,
    
    
    December 29,2008
    
    
    2007
    
    
    2008
    
    
    2007Product Sales
    
    $
    13,986
    
    
    $
    13,005
    
    
    $
    39,251
    
    
    $
    35,151Service Revenue
    
    
    6,006
    
    
    
    5,435
    
    
    
    17,204
    
    
    
    16,104Net Revenue
    
    
    19,992
    
    
    
    18,440
    
    
    
    56,455
    
    
    
    51,255Cost of Products Sold
    
    
    10,538
    
    
    
    9,351
    
    
    
    29,055
    
    
    
    25,306Cost of Services Sold
    
    
    4,723
    
    
    
    4,376
    
    
    
    13,570
    
    
    
    12,763Total Cost of Products
and Services Sold
    
    
    15,261
    
    
    
    13,727
    
    
    
    42,625
    
    
    
    38,069Gross Profit
    
    
    4,731
    
    
    
    4,713
    
    
    
    13,830
    
    
    
    13,186Selling, Marketing and Warehouse Expenses
    
    
    2,606
    
    
    
    2,304
    
    
    
    7,323
    
    
    
    6,627Administrative Expenses
    
    
    1,503
    
    
    
    1,365
    
    
    
    4,758
    
    
    
    4,472Total Operating Expenses
    
    
    4,109
    
    
    
    3,669
    
    
    
    12,081
    
    
    
    11,099Operating Income
    
    
    622
    
    
    
    1,044
    
    
    
    1,749
    
    
    
    2,087Interest Expense
    
    
    43
    
    
    
    17
    
    
    
    70
    
    
    
    80Other Expense, net
    
    
    56
    
    
    
    135
    
    
    
    68
    
    
    
    425Total Other Expense
    
    
    99
    
    
    
    152
    
    
    
    138
    
    
    
    505Income Before Income Taxes
    
    
    523
    
    
    
    892
    
    
    
    1,611
    
    
    
    1,582Provision for (Benefit from) Income Taxes
    
    
    181
    
    
    
    (316
    )
    
    
    611
    
    
    
    (58
    )Net Income
    
    
    342
    
    
    
    1,208
    
    
    
    1,000
    
    
    
    1,640Other Comprehensive (Loss) Income
    
    
    (89
    )
    
    
    (19
    )
    
    
    (92
    )
    
    
    438Comprehensive Income
    
    $
    253
    
    
    $
    1,189
    
    
    $
    908
    
    
    $
    2,078Basic Earnings Per Share
    
    $
    0.05
    
    
    $
    0.17
    
    
    $
    0.14
    
    
    $
    0.23Average Shares Outstanding
    
    
    7,373
    
    
    
    7,162
    
    
    
    7,280
    
    
    
    7,119Diluted Earnings Per Share
    
    $
    0.05
    
    
    $
    0.17
    
    
    $
    0.13
    
    
    $
    0.23Average Shares Outstanding
    
    
    7,599
    
    
    
    7,314
    
    
    
    7,486
    
    
    
    7,266
  3




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TRANSCAT, INC.
CONSOLIDATED BALANCE SHEETS
 (Unaudited)December 27,
    
    
    March 29,2008
    
    
    2008ASSETSCurrent Assets:Cash
    
    $
    78
    
    
    $
    208Accounts Receivable, less allowance for doubtful accounts of $78
and $56 as of December 27, 2008 and March 29, 2008, respectively
    
    
    8,689
    
    
    
    9,346Other Receivables
    
    
    818
    
    
    
    370Inventory, net
    
    
    5,534
    
    
    
    5,442Prepaid Expenses and Other Current Assets
    
    
    1,055
    
    
    
    773Deferred Tax Asset
    
    
    275
    
    
    
    248Total Current Assets
    
    
    16,449
    
    
    
    16,387Property and Equipment, net
    
    
    3,741
    
    
    
    3,211Goodwill
    
    
    7,923
    
    
    
    2,967Intangible Asset, net
    
    
    1,137
    
    
    
    Deferred Tax Asset
    
    
    805
    
    
    
    1,435Other Assets
    
    
    367
    
    
    
    344Total Assets
    
    $
    30,422
    
    
    $
    24,344LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    4,765
    
    
    $
    5,947Accrued Compensation and Other Liabilities
    
    
    1,994
    
    
    
    2,489Income Taxes Payable
    
    
    
    
    
    
    62Total Current Liabilities
    
    
    6,759
    
    
    
    8,498Long-Term Debt
    
    
    5,311
    
    
    
    302Other Liabilities
    
    
    495
    
    
    
    427Total Liabilities
    
    
    12,565
    
    
    
    9,227Shareholders Equity:Common Stock, par value $0.50 per share, 30,000,000 shares authorized;
7,648,907 and 7,446,223 shares issued as of December 27, 2008 and
March 29, 2008, respectively; 7,373,125 and 7,170,441 shares
outstanding as of December 27, 2008 and March 29, 2008, respectively
    
    
    3,824
    
    
    
    3,723Capital in Excess of Par Value
    
    
    8,380
    
    
    
    6,649Accumulated Other Comprehensive Income
    
    
    344
    
    
    
    436Retained Earnings
    
    
    6,297
    
    
    
    5,297Less: Treasury Stock, at cost, 275,782 shares as of
December 27, 2008 and March 29, 2008
    
    
    (988
    )
    
    
    (988
    )Total Shareholders Equity
    
    
    17,857
    
    
    
    15,117Total Liabilities and Shareholders Equity
    
    $
    30,422
    
    
    $
    24,344
  4




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##### Table of Contents



TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)Nine Months EndedDecember 27,
    
    
    December 29,2008
    
    
    2007Cash Flows from Operating Activities:Net Income
    
    $
    1,000
    
    
    $
    1,640Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:Deferred Income Taxes
    
    
    168
    
    
    
    (333
    )Depreciation and Amortization
    
    
    1,365
    
    
    
    1,290Provision for (Recovery of) Accounts Receivable and Inventory Reserves
    
    
    111
    
    
    
    (48
    )Stock-Based Compensation Expense
    
    
    476
    
    
    
    601Changes in Assets and Liabilities:Accounts Receivable and Other Receivables
    
    
    1,050
    
    
    
    409Inventory
    
    
    308
    
    
    
    (1,200
    )Prepaid Expenses and Other Assets
    
    
    (792
    )
    
    
    (859
    )Accounts Payable
    
    
    (1,568
    )
    
    
    1,402Accrued Compensation and Other Liabilities
    
    
    (522
    )
    
    
    (287
    )Income Taxes Payable
    
    
    (251
    )
    
    
    55Net Cash Provided by Operating Activities
    
    
    1,345
    
    
    
    2,670Cash Flows from Investing Activities:Purchase of Property and Equipment
    
    
    (1,038
    )
    
    
    (1,351
    )Purchase of Westcon, Inc., net of cash acquired
    
    
    (5,641
    )
    
    
    Net Cash Used in Investing Activities
    
    
    (6,679
    )
    
    
    (1,351
    )Cash Flows from Financing Activities:Revolving Line of Credit, net
    
    
    4,945
    
    
    
    (1,637
    )Payments on Other Debt Obligations
    
    
    (4
    )
    
    
    Issuance of Common Stock
    
    
    202
    
    
    
    219Excess Tax Benefits Related to Stock-Based Compensation
    
    
    41
    
    
    
    Net Cash Provided by (Used in) Financing Activities
    
    
    5,184
    
    
    
    (1,418
    )Effect of Exchange Rate Changes on Cash
    
    
    20
    
    
    
    44Net Decrease in Cash
    
    
    (130
    )
    
    
    (55
    )Cash at Beginning of Period
    
    
    208
    
    
    
    357Cash at End of Period
    
    $
    78
    
    
    $
    302Supplemental Disclosures of Cash Flow Activity:Cash paid during the period for:Interest
    
    $
    42
    
    
    $
    90Income Taxes, net
    
    $
    729
    
    
    $
    264Supplemental Disclosure of Non-Cash Investing Activity:Stock Issued in Connection with Business Acquisition
    
    $
    1,113
    
    
    $
    Capital Lease Obligation
    
    $
    49
    
    
    $
    
  5




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TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 CapitalCommon Stock
    
    
    In
    
    
    Accumulated
    
    
    
    
    
    
    Treasury StockIssued
    
    
    Excess
    
    
    Other
    
    
    
    
    
    
    Outstanding$0.50 Par Value
    
    
    of Par
    
    
    Comprehensive
    
    
    Retained
    
    
    at CostShares
    
    
    Amount
    
    
    Value
    
    
    Income
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance as of March 29, 2008
    
    
    7,446
    
    
    $
    3,723
    
    
    $
    6,649
    
    
    $
    436
    
    
    $
    5,297
    
    
    
    276
    
    
    $
    (988
    )
    
    $
    15,117Issuance of Common Stock
    
    
    202
    
    
    
    101
    
    
    
    1,214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,315Stock-Based Compensation
    
    
    
    
    
    
    
    
    
    
    476
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    476Tax Benefit from Stock-Based
Compensation
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Comprehensive Income:Currency Translation
Adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )Unrecognized Prior Service
Cost, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000Balance as of December 27, 2008
    
    
    7,648
    
    
    $
    3,824
    
    
    $
    8,380
    
    
    $
    344
    
    
    $
    6,297
    
    
    
    276
    
    
    $
    (988
    )
    
    $
    17,857
  6




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TRANSCAT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  GENERAL
 Description of Business:
 Basis of Presentation:
 Principles of Consolidation:
  Stock-Based Compensation:
   Expected life
    
    6 yearsAnnualized volatility rate
    
    
    61.3
    %Risk-free rate of return
    
    
    3.3
    %Dividend rate
    
    
    0.0
    %
  7




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##### Table of Contents



Foreign Currency Translation and Transactions:
  Earnings Per Share:
  Third Quarter Ended
    
    
    Nine Months EndedDecember 27,
    
    
    December 29,
    
    
    December 27,
    
    
    December 29,2008
    
    
    2007
    
    
    2008
    
    
    2007Shares:Dilutive
    
    
    226
    
    
    
    152
    
    
    
    206
    
    
    
    147Anti-dilutive
    
    
    557
    
    
    
    612
    
    
    
    577
    
    
    
    618Total
    
    
    783
    
    
    
    764
    
    
    
    783
    
    
    
    765Range of Exercise Prices per
Share:Options
    
    $
    2.20-$7.72
    
    
    $
    2.20-$7.72
    
    
    $
    2.20-$7.72
    
    
    $
    2.20-$7.72Warrants
    
    $
    2.83-$5.80
    
    
    $
    2.31-$5.80
    
    
    $
    2.83-$5.80
    
    
    $
    2.31-$5.80
 8




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NOTE 2  DEBT
 Description.
 Interest and Commitment Fees. 1 2
 Covenants.
 Other Terms.
 NOTE 3  STOCK-BASED COMPENSATION
  Stock Options:
  Weighted
    
    
    Weighted AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term (in years)
    
    
    ValueOutstanding as of March 29, 2008
    
    
    656
    
    
    $
    5.64Granted
    
    
    20
    
    
    
    6.75Exercised
    
    
    (6
    )
    
    
    2.69Cancelled/Forfeited
    
    
    (4
    )
    
    
    6.35Outstanding as of December 27, 2008
    
    
    666
    
    
    
    5.70
    
    
    
    8
    
    
    $
    1,396Exercisable as of December 27, 2008
    
    
    286
    
    
    
    4.05
    
    
    
    7
    
    
    
    1,070
   9




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##### Table of Contents



Restricted Stock:
  Warrants:
  Weighted
    
    
    Weighted AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term (in years)
    
    
    ValueOutstanding as of March 29, 2008
    
    
    99
    
    
    $
    3.75Exercised
    
    
    (30
    )
    
    
    2.55Cancelled/Forfeited
    
    
    (4
    )
    
    
    5.25Outstanding as of December 27, 2008
    
    
    65
    
    
    
    4.23
    
    
    
    2
    
    
    $
    231Exercisable as of December 27, 2008
    
    
    59
    
    
    
    4.09
    
    
    
    1
    
    
    
    220
  10




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NOTE 4  SEGMENT INFORMATION
  Third Quarter Ended
    
    
    Nine Months EndedDecember 27,
    
    
    December 29,
    
    
    December 27,
    
    
    December 29,2008
    
    
    2007
    
    
    2008
    
    
    2007Net Revenue:Product Sales
    
    $
    13,986
    
    
    $
    13,005
    
    
    $
    39,251
    
    
    $
    35,151Service Revenue
    
    
    6,006
    
    
    
    5,435
    
    
    
    17,204
    
    
    
    16,104Total
    
    
    19,992
    
    
    
    18,440
    
    
    
    56,455
    
    
    
    51,255Gross Profit:Product
    
    
    3,448
    
    
    
    3,654
    
    
    
    10,196
    
    
    
    9,845Service
    
    
    1,283
    
    
    
    1,059
    
    
    
    3,634
    
    
    
    3,341Total
    
    
    4,731
    
    
    
    4,713
    
    
    
    13,830
    
    
    
    13,186Operating Expenses:Product
    
    
    2,540
    
    
    
    2,316
    
    
    
    7,275
    
    
    
    6,896Service
    
    
    1,569
    
    
    
    1,353
    
    
    
    4,806
    
    
    
    4,203Total
    
    
    4,109
    
    
    
    3,669
    
    
    
    12,081
    
    
    
    11,099Operating Income
    
    
    622
    
    
    
    1,044
    
    
    
    1,749
    
    
    
    2,087Unallocated Amounts:Other Expense, net
    
    
    99
    
    
    
    152
    
    
    
    138
    
    
    
    505Provision for (Benefit from) Income Taxes
    
    
    181
    
    
    
    (316
    )
    
    
    611
    
    
    
    (58
    )Total
    
    
    280
    
    
    
    (164
    )
    
    
    749
    
    
    
    447Net Income
    
    $
    342
    
    
    $
    1,208
    
    
    $
    1,000
    
    
    $
    1,640
 NOTE 5  ACQUISITION
     11




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Purchase Price Paid:Cash Paid to Seller at Closing
    
    $
    4,216Westcon Debt Paid by Transcat at Closing
    
    
    466Fair Value of Common Stock Issued
    
    
    1,113Cash Paid to Seller in November 2008
    
    
    1,017Direct Acquisition Costs
    
    
    116Total Purchase Price
    
    $
    6,928Allocation of Purchase Price:Intangible Asset  Customer Base
    
    $
    1,206Deferred Tax Liability
    
    
    (458
    )Goodwill
    
    
    4,9565,704Plus: Current Assets
    
    
    1,675Non-Current Assets
    
    
    274Less: Current Liabilities
    
    
    (658
    )Non-Current Liabilities
    
    
    (67
    )Total Purchase Price
    
    $
    6,928
    (Unaudited)Third Quarter
    
    (Unaudited)Ended
    
    Nine Months EndedDecember 29,
    
    December 27,
    
    December 29,2007
    
    2008
    
    2007Net Revenue
    
    $
    21,039
    
    
    $
    59,605
    
    
    $
    58,914Net Income
    
    $
    1,257
    
    
    $
    837
    
    
    $
    1,709Basic Earnings Per Share
    
    $
    0.17
    
    
    $
    0.12
    
    
    $
    0.24Diluted Earnings Per Share
    
    $
    0.17
    
    
    $
    0.11
    
    
    $
    0.23
 NOTE 6  COMMITMENTS
  12




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements.
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 Accounts Receivable:
 Stock-Based Compensation.
   13




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Revenue Recognition.
 RESULTS OF OPERATIONS
  (Unaudited)
    
    
    (Unaudited)Third Quarter Ended
    
    
    Nine Months EndedDecember 27,
    
    
    December 29,
    
    
    December 27,
    
    
    December 29,2008
    
    
    2007
    
    
    2008
    
    
    2007As a Percentage of Net Revenue:Product Sales
    
    
    70.0
    %
    
    
    70.5
    %
    
    
    69.5
    %
    
    
    68.6
    %Service Revenue
    
    
    30.0
    %
    
    
    29.5
    %
    
    
    30.5
    %
    
    
    31.4
    %Net Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Product Gross Profit
    
    
    24.7
    %
    
    
    28.1
    %
    
    
    26.0
    %
    
    
    28.0
    %Service Gross Profit
    
    
    21.4
    %
    
    
    19.5
    %
    
    
    21.1
    %
    
    
    20.7
    %Total Gross Profit
    
    
    23.7
    %
    
    
    25.6
    %
    
    
    24.5
    %
    
    
    25.7
    %Selling, Marketing and Warehouse Expenses
    
    
    13.0
    %
    
    
    12.5
    %
    
    
    13.0
    %
    
    
    12.9
    %Administrative Expenses
    
    
    7.5
    %
    
    
    7.4
    %
    
    
    8.4
    %
    
    
    8.7
    %Total Operating Expenses
    
    
    20.5
    %
    
    
    19.9
    %
    
    
    21.4
    %
    
    
    21.6
    %Operating Income
    
    
    3.2
    %
    
    
    5.7
    %
    
    
    3.1
    %
    
    
    4.1
    %Interest Expense
    
    
    0.2
    %
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.2
    %Other Expense, net
    
    
    0.3
    %
    
    
    0.7
    %
    
    
    0.1
    %
    
    
    0.8
    %Total Other Expense
    
    
    0.5
    %
    
    
    0.8
    %
    
    
    0.2
    %
    
    
    1.0
    %Income Before Income Taxes
    
    
    2.7
    %
    
    
    4.9
    %
    
    
    2.9
    %
    
    
    3.1
    %Provision for (Benefit from) Income Taxes
    
    
    0.9
    %
    
    
    (1.7
    )%
    
    
    1.1
    %
    
    
    (0.1
    )%Net Income
    
    
    1.8
    %
    
    
    6.6
    %
    
    
    1.8
    %
    
    
    3.2
    %
 14




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##### Table of Contents



THIRD QUARTER ENDED DECEMBER 27, 2008 COMPARED TO THIRD QUARTER ENDED DECEMBER 29, 2007 (dollars in
thousands):
 Revenue:
 Third Quarter EndedDecember 27,
    
    
    December 29,2008
    
    
    2007Net Revenue:Product Sales
    
    $
    13,986
    
    
    $
    13,005Service Revenue
    
    
    6,006
    
    
    
    5,435Total
    
    $
    19,992
    
    
    $
    18,440
   FY 2009
    
    
    FY 2008Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Product Sales Growth (Decline)
    
    
    7.5
    %
    
    
    15.5
    %
    
    
    12.7
    %
    
    
    
    (2.4
    %)
    
    
    5.8
    %
    
    
    13.6
    %
    
    
    3.7
    %
  FY 2009
    
    
    FY 2008Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Product Sales Per Business Day
    
    $
    226
    
    
    $
    206
    
    
    $
    192
    
    
    
    $
    197
    
    
    $
    213
    
    
    $
    178
    
    
    $
    171
 15




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##### Table of Contents



FY 2009 Third Quarter
    
    
    FY 2008 Third QuarterPercent of
    
    Gross
    
    
    Percent of
    
    GrossNet Sales
    
    Profit % (1)
    
    
    Net Sales
    
    Profit % (1)Direct
    
    
    79.7
    %
    
    
    23.9
    %
    
    
    
    85.6
    %
    
    
    26.2
    %Reseller
    
    
    19.1
    %
    
    
    18.1
    %
    
    
    
    13.0
    %
    
    
    17.7
    %Freight Billed to Customers
    
    
    1.2
    %
    
    
    
    
    
    
    
    1.4
    %Total
    
    
    100.0
    %
    
    
    
    
    
    
    
    100.0
    %
 
 (1)
    
    Calculated as net sales less purchase costs divided by net sales.  FY 2009
    
    
    FY 2008Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Total Pending Product Shipments
    
    $
    1,701
    
    
    $
    1,398
    
    
    $
    1,366
    
    
    
    $
    1,419
    
    
    $
    1,411
    
    
    $
    1,689
    
    
    $
    1,678% of Pending Product Shipments
That are Backorders
    
    
    84.1
    %
    
    
    70.7
    %
    
    
    74.7
    %
    
    
    
    81.5
    %
    
    
    78.1
    %
    
    
    74.1
    %
    
    
    81.0
    %
  FY 2009
    
    
    FY 2008Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Service Revenue Growth
    
    
    10.5
    %
    
    
    4.6
    %
    
    
    5.3
    %
    
    
    
    10.6
    %
    
    
    9.9
    %
    
    
    8.6
    %
    
    
    5.6
    %
 16




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##### Table of Contents



FY 2009 Third
    
    
    
    FY 2008 ThirdQuarter
    
    
    
    Quarter% of
    
    
    
    
    
    
    
    % ofService
    
    
    Service
    
    
    
    Service
    
    
    ServiceSegment
    
    
    Segment
    
    
    
    Segment
    
    
    SegmentRevenue
    
    
    Revenue
    
    
    
    Revenue
    
    
    RevenueIn-House
    
    $
    4,705
    
    
    
    78.3
    %
    
    
    $
    4,284
    
    
    
    78.8
    %Outsourced
    
    
    1,093
    
    
    
    18.2
    %
    
    
    
    1,009
    
    
    
    18.6
    %Freight Billed to
Customers
    
    
    208
    
    
    
    3.5
    %
    
    
    
    142
    
    
    
    2.6
    %Total
    
    $
    6,006
    
    
    
    100.0
    %
    
    
    $
    5,435
    
    
    
    100.0
    %
 Gross Profit:
 Third Quarter EndedDecember 27,
    
    
    December 29,2008
    
    
    2007Gross Profit:Product
    
    $
    3,448
    
    
    $
    3,654Service
    
    
    1,283
    
    
    
    1,059Total
    
    $
    4,731
    
    
    $
    4,713
   FY 2009
    
    
    FY 2008Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Product Gross Profit % (1)
    
    
    22.8
    %
    
    
    24.2
    %
    
    
    23.9
    %
    
    
    
    24.1
    %
    
    
    25.1
    %
    
    
    25.8
    %
    
    
    24.6
    %Other Income % (2)
    
    
    1.9
    %
    
    
    1.9
    %
    
    
    3.4
    %
    
    
    
    3.0
    %
    
    
    3.0
    %
    
    
    2.1
    %
    
    
    3.4
    %Product Gross Profit %
    
    
    24.7
    %
    
    
    26.1
    %
    
    
    27.3
    %
    
    
    
    27.1
    %
    
    
    28.1
    %
    
    
    27.9
    %
    
    
    28.0
    %
 
 (1)
    
    Calculated as net sales less purchase costs divided by net sales.(2)
    
    Includes vendor rebates, cooperative advertising income, freight billed to customers,
freight expenses, and direct shipping costs. 17




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##### Table of Contents



FY 2009
    
    
    FY 2008Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Service Gross
Profit Dollar
(Decline) Growth
    
    
    21.2
    %
    
    
    6.5
    %
    
    
    (0.3
    %)
    
    
    
    32.5
    %
    
    
    14.0
    %
    
    
    5.0
    %
    
    
    3.8
    %
 Operating Expenses:
 Third Quarter EndedDecember 27,
    
    
    December 29,2008
    
    
    2007Operating Expenses:Selling, Marketing and Warehouse
    
    $
    2,606
    
    
    $
    2,304Administrative
    
    
    1,503
    
    
    
    1,365Total
    
    $
    4,109
    
    
    $
    3,669
  Other Expense:
 Third Quarter EndedDecember 27,
    
    
    December 29,2008
    
    
    2007Other Expense:Interest Expense
    
    $
    43
    
    
    $
    17Other Expense, net
    
    
    56
    
    
    
    135Total
    
    $
    99
    
    
    $
    152
  Taxes:
 Third Quarter EndedDecember 27,
    
    December 29,2008
    
    2007Provision for (Benefit from) Income Taxes
    
    $
    181
    
    
    $
    (316
    )
  18




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##### Table of Contents



NINE MONTHS ENDED DECEMBER 27, 2008 COMPARED TO NINE MONTHS ENDED DECEMBER 29, 2007 (dollars in
thousands):
 Revenue:
 Nine Months EndedDecember 27,
    
    
    December 29,2008
    
    
    2007Net Revenue:Product Sales
    
    $
    39,251
    
    
    $
    35,151Service Revenue
    
    
    17,204
    
    
    
    16,104Total
    
    $
    56,455
    
    
    $
    51,255
    Nine Months Ended
    
    
    Nine Months EndedDecember 27, 2008
    
    
    December 29, 2007Percent of
    
    Gross
    
    
    Percent of
    
    GrossNet Sales
    
    Profit % (1)
    
    
    Net Sales
    
    Profit % (1)Direct
    
    
    79.7
    %
    
    
    24.9
    %
    
    
    
    84.9
    %
    
    
    26.5
    %Reseller
    
    
    18.9
    %
    
    
    18.0
    %
    
    
    
    13.6
    %
    
    
    17.2
    %Freight Billed to Customers
    
    
    1.4
    %
    
    
    
    
    
    
    
    1.5
    %Total
    
    
    100.0
    %
    
    
    
    
    
    
    
    100.0
    %
 
 (1)
    
    Calculated as net sales less purchase costs divided by net sales.  19




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##### Table of Contents



Gross Profit:
 Nine Months EndedDecember 27,
    
    
    December 29,2008
    
    
    2007Gross Profit:Product
    
    $
    10,196
    
    
    $
    9,845Service
    
    
    3,634
    
    
    
    3,341Total
    
    $
    13,830
    
    
    $
    13,186
    Operating Expenses:
 Nine Months EndedDecember 27,
    
    
    December 29,2008
    
    
    2007Operating Expenses:Selling, Marketing and Warehouse
    
    $
    7,323
    
    
    $
    6,627Administrative
    
    
    4,758
    
    
    
    4,472Total
    
    $
    12,081
    
    
    $
    11,099
  Other Expense:
 Nine Months EndedDecember 27,
    
    
    December 29,2008
    
    
    2007Other Expense:Interest Expense
    
    $
    70
    
    
    $
    80Other Expense
    
    
    68
    
    
    
    425Total
    
    $
    138
    
    
    $
    505
  20




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##### Table of Contents



Taxes:
 Nine Months EndedDecember 27,
    
    December 29,2008
    
    2007Provision for (Benefit from) Income Taxes
    
    $
    611
    
    
    $
    (58
    )
  LIQUIDITY AND CAPITAL RESOURCES
  Cash Flows .
 Nine Months EndedDecember 27,
    
    December 29,2008
    
    2007Cash Provided by (Used in):Operating Activities
    
    $
    1,345
    
    
    $
    2,670Investing Activities
    
    
    (6,679
    )
    
    
    (1,351
    )Financing Activities
    
    
    5,184
    
    
    
    (1,418
    )
 Operating Activities:
 
    
    Inventory/Accounts Payable: Due to economic conditions in the third quarter of
fiscal year 2009 that we anticipate will carry forward into the fourth quarter, we have
implemented tight monitoring controls to drive down inventory levels. These efforts
provided approximately $0.3 million of cash for operations compared to the $1.2 million
used for inventory in the first nine months of fiscal year 2008. However, in the first
nine months of fiscal year 2009 operating cash flow has been negatively impacted by
payments made to reduce accounts payable by $1.6 million, compared to an increase in
accounts payable of $1.4 million in the first nine months of fiscal year 2008.
    
    Receivables: We continue to generate positive operating cash flow and maintain
strong collections on our accounts receivable. The following table illustrates our
days sales outstanding from fiscal year 2008 to fiscal year 2009:
 December 27,
    
    December 29,2008
    
    2007Net Sales, for the last two fiscal months
    
    $
    13,239
    
    
    $
    13,055Accounts Receivable, net
    
    $
    8,689
    
    
    $
    8,271Days Sales Outstanding (based on 60 days)
    
    
    39
    
    
    
    38
 Investing
Activities:
 Financing Activities:
 21




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##### Table of Contents



Debt.
  OUTLOOK
     
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 INTEREST RATES
   FOREIGN CURRENCY
   22




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Controls over Financial Reporting.
 
 PART II. OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
  Our Acquisitions Or Future Acquisition Efforts, Which Are Important To Our Growth, May Not Be
Successful, Which May Limit Our Growth Or Adversely Affect Our Results Of Operations And Financial
Condition
  Our Recently Completed Acquisition Of Westcon Makes Evaluating Our Operating Results Difficult
Given The Significance To Our Operations, And Our Historical Results Do Not Give You An Accurate
Indication Of How We Will Perform In The Future
  23




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##### Table of Contents



The Financing Of Any Future Acquisitions We Make May Result In Dilution To Your Stock Ownership
And/Or Could Increase Our Leverage And Our Risk Of Defaulting On Our Bank Debt
  The Global Financial Crisis May Have An Impact On Our Business And Financial Condition In Ways That
We Currently Cannot Predict Including The Impact On Our Customers Activity Levels And Spending For
Our Products And Services
   
 ITEM 6. EXHIBITS
  24




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##### Table of Contents



SIGNATURES
  TRANSCAT, INC.Date:  February 9, 2009
    /s/ Charles P. HaddedCharles P. HadeedChief Executive Officer, President and Chief Operating OfficerDate:  February 9, 2009
    /s/ John J. ZimmerJohn J. ZimmerVice President of Finance and Chief Financial Officer 25




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##### Table of Contents



INDEX TO EXHIBITS
 (10)
    
    Material Contracts
 10.1
    
    Amendment to Agreement for Severance Upon
Change in Control for Charles P. Hadeed
dated December 16, 2008
 (31)
    
    Rule 13a-14(a)/15d-14(a) Certifications
 31.1
    
    Certification of Chief Executive Officer31.2
    
    Certification of Chief Financial Officer
 (32)
    
    Section 1350 Certifications
 32.1
    
    Section 1350 Certifications
 26